On the Progressivity of Obamacare

In a very fine study, Henry Aaron and Gary Burtless at Brookings have looked at the ACA’s potential effects on income inequality and have preliminarily concluded that the ACA redistributes income—largely in the form of health benefits fits—to the poorest one-third of Americans. Most of the law’s additional subsidies—the expansion of Medicaid and subsidies for those buying insurance on the exchange—are highest for those with the lowest incomes. Offsets, such as some new taxes, tend to be concentrated less at those lower income levels.

What the Aaron and Burtless’ study was never intended to assess—and a lingering 21st century concern with almost all government health policies—is the ACA’s effectiveness and efficiency, both for the public in general and those with modest means in particular. For instance, many rewards of our government health policy have traditionally been captured by health industry providers, who are able to charge consumers higher prices. A program can be progressive, but still end up charging the public an additional $2 for $1.50 or $1 worth of care.

The ACA does at times attempt to deal with some of these issues and includes several experiments. But it was mainly directed at improving access, not reducing health costs. Reforms beyond the ACA still are required on that front regardless of which political party accedes to power.

3 Comments on “On the Progressivity of Obamacare”

The redistributive nature of the new health care policy is a counterweight to the redistributive nature of our tax policy (or are the tax policy changes a correction of an earlier redistribution?). Since we do not know what a distribution without any redistribution would be, we do not have a standard for what is natural or fair.

Without some sort of redistribution from what we have now, low wage workers who have expensive illnesses have their lives dominated and destroyed by their illnesses, go bankrupt, and sometimes fail to survive. This is our problem. If this redistribution is not to be done by governments, it will have to occur from private charity. Those who want governments to stay away from redistribution are not engaged in a huge public effort to build up private charities. They talk as if people cannot afford to pay any more, but if this is true people cannot afford adequate funding of charities either. The uncollectible ER bills are (involuntary) charity by the hospitals and everybody they bill.

We do not want to pay to keep unimportant people alive and healthy; every unimportant person or family must pay their own way or suffer the consequences. This is the justice of individuals in the market. It is not the justice of members of a family, or of citizens in a community.

Beyond all the political infighting over Obamacare remains the question of what sort of people we are and want to be. Right now we are people who dodge the question.

Please contact Gene (esteuerl@urban.org) if interested in a presentation for his book tour or in discounts for groups or larger orders.

The Government We Deserve is a periodic column on public policy by Eugene Steuerle, an Institute fellow and the Richard B. Fisher Chair at the nonpartisan Urban Institute. Steuerle is also a former deputy assistant secretary of the Treasury. The opinions are those of the author and do not necessarily reflect those of the Urban Institute, its trustees, or its sponsors.
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